ALEX BRUMMER: Cleaning up way companies spray cash to gain business abroad will improve governance in nations with which we trade and aid

Rolls-Royce may have behaved in exemplary fashion in co-operating with authorities over its global bribery and corruption activities. But that doesn’t make its past behaviour any more acceptable.

The scale of the £671m of fines levied under the Deferred Prosecution Agreement (DPA) might seem vast. But the sums levied are only a tiny fraction of the penalties paid by the banks over Libor manipulation, the sale of mortgage securities and payment protection insurance. So in some ways the aerospace giant escaped lightly.

The breathtaking magnitude and variety of Rolls’s wrongdoing is mind-boggling and it is why senior employees and the controlling mind, referred to in Lord Justice Leveson’s 53-page judgement, must expect consequences.

Mind-boggling: Rolls spent an incredible £130m of company funds on legal fees and advice in the US and Britain

This will not be a comfortable moment for former chief executive Sir John Rose, currently at Rothschild, who was at the helm when some of the bad stuff happened.

The DPA covered conduct across seven markets, spanning a period from the 1980s to the present decade, and deals with 12 counts of criminal conduct. Just how deeply ingrained the venal behaviour has become in the company’s culture is evident from US Department of Justice documents.

When the Iraqi government raised questions about bribes used to secure a turbine sale the officials who raised the issue were paid off to keep quiet!

Aside from the fines this has been far from a cost-free exercise for shareholders. Rolls spent an incredible £130m of company funds on legal fees and advice in the US and Britain.

That is ten times the amount expended by the Serious Fraud Office which used sophisticated software to trawl through 40m documents, emails, ledgers and other information handed over by the company.

Share this article

It is this treasure trove of papers which provides the email and electronic trail which led to the highest levels in the company and is likely to result in some criminal prosecutions of individuals.

Critics of Britain’s Bribery Act are inclined to argue against the authorities persecuting our finest companies when other countries, such as France, take a far more lenient attitude.

The UK is not alone in pursuing these cases. The Americans led the way with the Foreign Corrupt Practices Act, a relic of the Watergate affair, and the notorious Lockheed bribery case dating back to the 1970s.

There are good reasons why free-market democracies must respond to unscrupulous behaviour. Bribery and dishonest payments distort the free markets in which the Anglo-Saxon democracies believe. Such payments reward kleptocracies such as China and corrupt politicians and officials. They also divert valuable resources to the wrong places.

This paper rightly has questioned the way in which Britain’s £12bn foreign aid budget is spent ending up in the hands of nonsense projects, such as the ‘Ethiopian Spice Girls’ and the Panamanian-created bank accounts of developing nation dictators.

Cleaning up the way in which our top companies spray cash around to gain business overseas is a critical part of improving governance in the nations with which we trade and aid.

Rolls is in the firing line but it is not alone. GlaxoSmithKline could be next.

There should be zero tolerance for corporate mischief overseas.

Failing grades

You have to worry for the future of Pearson. Chief executive John Fallon is one of those unfortunate bosses to succeed a life force in the shape of Dame Marjorie Scardino.

He is now paying the price of pursuing her strategy. She tidied Pearson up and made it a predominantly education enterprise. Fallon narrowed the company further by jettisoning the FT and the stake in The Economist.

US revenues have plunged 30 per cent, profits guidance lowered for the next two years, the dividend slashed and the next thing to be thrown overboard likely will be the stake in Penguin Random House.

The 29 per cent fall in the share price suggests that Fallon will have to go.

And the 173-year-old firm could find itself the victim of predators ready to take advantage of sterling, stock price and managerial weakness.

Euro history

Much has been made of the rich colonial role of Lancaster House in West London, the chosen spot for Theresa May’s grand plan for Brexit.

In the aftermath of the euroland crisis of 2010 and the threatened implosion of the single currency it was also the scene of another important moment.

In the run-up to the London Olympics the president of the European Central Bank, Mario Draghi, came to the podium in July 2011 and told assembled central bankers and financiers: ‘The ECB is ready to do whatever it takes to preserve the euro and, believe me, it will be enough.’

ECB’s interventions – support for euroland banks, quantitative easing and negative interest rates – were indeed enough to shore up the system. The measures showed a commitment to a failed system but did nothing to prevent a chronic banking crisis, disturbing levels of unemployment among younger EU citizens and the rise of the nationalist right.